RJio launch: The art of free voice

The numbers flashing on my mobile phone for incoming calls are increasingly unrecognizable, until I pick up and reach the familiar voice of a friend, family members, colleagues or staff, and realize that they have moved to a new Jio SIM. Café conversations are around SIM outages, long queues and sleek phones. The chosen few who have a Jio SIM gush about fast movie downloads, the relief from a incessant hunt for WiFi, and how Jio SIM is the new WiFi hotspot at home – even those who are not able to complete voice calls and are greeted with a busy tone are ecstatic. My office colleague wants to port his current iPhone SIM to Jio, and the office driver just bought a new VoLTE capable handset for about ten thousand rupees.

RJio’s launch has generated a viral demand, almost appealing to a latent visceral need for affordable, and ‘available’ mobile services across the board. The competition is in disarray, even after months of planning, pre-emptive launches and consumer engagement blitz. The stock prices of incumbent telcos have melted – even investors in RIL are worried that RJio’s ‘disruptive’ telecom foray will dilute the lucrative margins from the PetChem business - although such fears may actually be misplaced.

The cornerstone of Jio launch has been the ‘lifelong free voice’ proposition, conveyed intermittently on FM radio stations in the reassuring voice of Amitabh, and splashed prominently on other media properties. Once the current promotional period, where everything is free, expires, consumers will have to pick one of the announced tariff plans. The unit economics of these plans, especially the mass-market INR149 plan indicates that not only nothing will be free, but also that both voice and data will be charged at market prices.

Incumbent operators currently realize about 40p per minute for voice calls and 22p per MB for mobile data. The Jio INR149 plan offers 300MB of data and ‘free voice. If we assume that voice is actually free, then per MB price for mobile data is 50p per MB, more than double that currently being paid by users.

An alternative way to examine the price plan is to assume that voice has an implicit pricing of INR80, same as the current usage of voice-only subscribers. In such a case, a consumer is paying INR69 for 300MB mobile data, translating into 23p per MB – and to everyone’s surprise, the user is paying current market prices for voice as well as data. The risk of higher voice usage affecting plan profitability is negligible as unlike data, voice usage is relatively less elastic. Its easy to start downloading HD movies if data is cheap, but unreasonable to expect that one starts talking a lot more just because the voice charges are low, or that voice is free.

However, it’s unfair to expect delirious customers in long queues, egged on by their neighbors and almost everyone on social media to crunch these numbers.

More important than high per unit realization, the current plans and free voice scheme has saved at least $5 billion in subscriber acquisition costs for RJio. The pull of free voice and data is ensuring that end users are buying LTE phones with VoLTE capability at full retail prices. In the absence of the free voice and free promo offer, an operator with new LTE band plans will need to have a handset subsidy, resulting in an acquisition cost of at least $50 per user. For an acquisition plan of 100 million users, this translates into an acquisition bill of $5 billion plus – ‘free voice’ ensures that such subsidies are not needed anymore.

A majority of these phones have provision for dual SIMs, and even after the expiry of free promo period, its very likely that Jio SIM will be always present in these devices for mobile data – incumbent SIM may also be present for incoming calls, or as a backup in case voice calls are not going through the Jio SIM. The ‘free voice’ commitment ensures high realization, customer lock-in and zero subsidies, without actually being free.

The entry-level plans are followed by big bucket plans, going up to 75GB. Now, a regular user cannot possibly consume 20GB and 50GB buckets unless they start using their phones as a home broadband connection for multiple devices, as is happening in many instances of trial launch. Essentially such a plan is a shared family data usage plan and allows RJio access to consumers who don’t even have a LTE phone or even a smartphone - again, free voice is a non-issue, but works effectively as it plants a Jio SIM within the household to be followed by many future offerings.

The RJio proposition may look disruptive to customers, competitors and maybe even investors, but it’s a brilliant package of clever marketing, financial planning and competitive strategy, at least in its current avatar.

DISCLAIMER: The views expressed are solely of the author and ETTelecom.com does not necessarily subscribe to it. ETTelecom.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.

Pankaj has been a consultant in Telecoms, Media and Technology for more than fifteen years. He was earlier the co-head for India and board member at Analysys Mason, and has also held senior positions at Bharti Airtel.

Pankaj has been a consultant in Telecoms, Media and Technology for more than fifteen years. He was earlier the co-head for India and board member at Analysys Mason, and has also Show more.. held senior positions at Bharti Airtel.